Stress in liquidity is at the heart of any banking crisis in history. During the financial crisis of 2007-09, funding liquidity risk caused the collapse of interbank markets, which became the focus of authorities’ attention at restoring order. Accordingly, central banks and other regulatory bodies world-wide have been evolving prudential liquidity norms in order to impart stability to financial systems. Apart from implementing newer norms on liquidity, they have been devising ways of assessing objectively liquidity conditions in the markets. As an end to this objective, various central banks have started identifying the indicators of liquidity and preparing a composite index thereof in order to have a bird’s eye view of liquidity conditions across financial markets. In this study, a systemic liquidity index (SLI) is constructed considering prevailing rate variables across different financial markets in India. The SLI, so developed, is appropriately validated for its function as a metric for measuring systemic liquidity and its implications on the bank's performance.