Taking a cue from the central banks of developed countries like US, UK, Japan and Switzerland, among others, which are infusing liquidity to enthuse the banking system, the Reserve Bank of India has also decided to pump in around Rs 84,000 crore ($18 billion) in the domestic banking system through liquidity adjustment facility (LAF).
Central banks world over, going by the present figures, are likely to infuse liquidity close to $800 billion by the weekend to enable banks to meet their liabilities.
As the financial crisis in US is spreading in the other parts of the world, banks are not lending to each other as they are doubting the collateral being offered against any loan.
The banks in the developed markets prefer to sit on cash. This has created a huge liquidity crisis in the developed market and banks are finding it difficult to meet their liabilities.