Pakistan’s inter-bank lending rates drop to 31-month low

The lending rates between banks have dropped to their lowest level in 31 months, following a decline in treasury bill yields in the latest auction.

The 6-month Karachi Interbank Offered Rate (KIBOR) fell to 12.88% on November 28, 2024, which is 212 basis points below the central bank's policy rate of 15%.

This decrease occurred after a mid-week auction where the government raised PKR 616 billion at rates below the central bank's benchmark, according to Topline Securities.

Since June this year, there has been a sharp decline in interest rates reflecting a significant easing in the borrowing costs for different maturities.

The 6-month KIBOR saw the largest decrease of 7.26 percentage points to 12.88% as of November 28 from 20.14% on June 28, highlighting the most substantial reduction in rates among the three durations.

The 3-month rates have declined by 7.19 percentage points to 13.05%, while 12-month rates eased by 6.63 percentage points to 12.59%.

It may be mentioned here that policy rates have declined 7.0 percentage points to 15% from the high of 22% in June.

The State Bank of Pakistan (SBP) in its last policy announcement slashed the interest rate by 250 basis points (bps) to 15%, marking its fourth consecutive cut as inflation remains in single digits through October.

The inter-bank rates are down around 200 basis points from the policy rates indicating that monetary easing would continue going forward.