👉 Banking fluid, also known as the interbank lending market, is a system where banks lend and borrow short-term funds from one another to manage their liquidity needs. This market operates through an informal agreement where banks agree to lend funds to each other at prevailing interest rates, known as the overnight rate or the federal funds rate in some countries, depending on the system. The primary purpose of this fluid is to ensure that banks have sufficient cash reserves to meet their daily operational demands and unexpected liquidity needs, while also providing a mechanism for banks to earn interest on excess reserves. This system is crucial for maintaining the stability and efficiency of the financial system, allowing banks to function smoothly and meet their customers' needs.
