ZURICH- The Swiss National Bank's holding of overnight funds for commercial banks increased by the largest amount in more than five years last week, indicating how it is injecting money into the Swiss economy hit by the coronavirus outbreak.

Total sight deposits rose to 620.455 billion Swiss francs ($649.08 billion) from 608.826 billion francs in the previous week, data showed on Monday.

The 11.6 billion franc increase was the biggest rise since January 2015, when the SNB scrapped its policy of pegging the franc to the euro.

Increases in sight deposits can serve as a proxy for the SNB's foreign currency purchases, although economists said last week's increase could also represent other factors.

The SNB declined to comment on Monday, but Chairman Thomas Jordan said this month he was committed to increasing interventions to restrain the rise of the safe-haven franc.

The central bank has also pledged to support the Swiss economy with additional liquidity by setting up its COVID-19 refinancing facility last week.

"In a stressed situation like the one we are facing, the risk of companies defaulting on loans increases. At the same time, the banks are seeking to hold higher levels of liquidity," Jordan said last week.

"These two factors can lead to a credit shortage, even though demand for credit is rising sharply," he added.

Loan guarantees by the Swiss government to banks and the SNB's refinancing facility can unblock the system, he said.

Credit Suisse economist Maxime Botteron said it was difficult to say how much of increase was due to liquidity operations to keep the Swiss overnight interest rate (SARON) close to its policy rate of -0.75% or extra liquidity provided to the banks by the SNB.

Some of the increase was probably due to increased foreign currency interventions, he said.

Sight deposits increased by nearly 6 billion francs the week before as the SNB sought to stem demand for the currency. 

The situation is not comparable to the last big increase in 2015, Botteron noted.

"Now in addition to dampening appreciation pressures on the franc, the SNB is also increasing its balance sheet by providing liquidity for the banking sector so it can fund the real economy," Botteron said.

"I would expect the sight deposits to increase for some time yet, with some of it being also used to prevent the franc getting too strong." ($1 = 0.9559 Swiss francs)

(Reporting by John Revill; Editing by Michael Shields) ((John.Revill@thomsonreuters.com; +41 58306 7022; Reuters Messaging: john.revill.thomsonreuters.com@reuters.net))