Interbank lending

Interbank lending is when banks lend money to each other, usually for short periods, to manage their daily cash needs and ensure they meet regulatory reserve requirements. These loans are typically very secure and involve large sums, often at a standard interest rate called the "interbank rate." This system helps maintain liquidity in the financial system, ensure banks have enough funds to operate smoothly, and stabilize overall financial markets. Essentially, interbank lending is a way for banks to support each other financially, ensuring stability and smooth functioning of the banking system.