Alistair Darling was due this morning to outline an unprecedented £50bn bailout of Britain's banks as the sector took yet another battering yesterday with the Royal Bank of Scotland leading the plunge, falling in value by 39%. Details of the rescue package were to be given by the Chancellor at 7am, an hour before the opening of the London Stock Exchange. He will later make a House of Commons statement.

Apart from the provision of capital, whereby the taxpayer takes a stake in several banks, it is believed the UK Government plan will involve providing a facility so that bigger lenders can fund their day-to-day business adequately.

Already, the Bank of England has provided banks with liquidity, running into hundreds of billions of pounds, pumping in another £40bn yesterday to oil the wheels of the financial system. Mr Darling will be hoping that his "big step" to create effectively a public-private partnership of the UK's main lenders will succeed in restoring confidence in Britain's banks where other measures have so far failed.

At Westminster, Nick Clegg, the Liberal Democrat leader, insisted it was now essential the UK Government acted decisively to halt the rout.

"The burden of expectation on the government is now immense. This announcement must be bold, clear and big enough to stop the downward spiral of crippling uncertainty in our financial markets," he said.

In the City, there was also an anxious wait. Richard Hunter of stockbroker Hargreaves Lansdown, said: "The main thing is that it has got to be co-ordinated and it needs to be thorough. What we have had so far is a sort of piecemeal approach."

Banking expert Alistair Milne said the recapitalisation plan would mean the taxpayer "owning a big chunk of the British banking system".

He added: "In the short to medium term, this will do a great deal of good."

Following 90-minute crisis talks involving Mervyn King, the Bank's governor, Lord Turner, chairman of the Financial Services Authority, and Prime Minister Gordon Brown, Mr Darling issued a brief holding statement, saying the overall aim was to "put banks on a longer-term sound footing".

Earlier, the PM's spokesman dismissed suggestions that the Treasury had dithered and delayed, making clear any announcement would be made in a "calm, orderly and responsible way".

However, there were recriminations in Whitehall following a meeting between Mr Darling and bank chiefs on Monday night when the bailout plan was discussed.

There was Treasury disbelief that the banks had supposedly leaked details of the meeting about a recapitalisation plan while senior City figures were reported to be "incandescent with rage" at the leak, which led to the savaging of bank shares.

One senior banking source was quoted as saying the bank chiefs, including RBS's Sir Fred Goodwin, made it clear to Mr Darling that the "dickering has got to stop".

At one point, RBS was forced to issue a statement denying it had asked the Chancellor for an injection of capital.

After a torrid day on the stock exchange on Monday when the FTSE fell a record 391 points in a single day, yesterday it steadied, finishing 16 points up at 4605. However, yet again bank shares took a tumble. Shares in RBS plummeted 39% to close at 90p, down from a high of around £7 last spring. HBOS slumped 41.5% to 94p, Lloyds TSB dropped 13% to 225p and Barclays fell 9% to 285p.

On Wall Street, the Dow Jones suffered a fall of more than 500 points, standing by 9pm yesterday at 9447.

The international dimension of the credit crunch affecting domestic consumers hit home when the collapse of icesave, an internet bank, meant an estimated 275,000 UK savers could face difficulties recovering their cash.

A study by the Recruitment & Employment Confederation which showed demand for staff was falling at its sharpest rate since the body began its survey 11 years ago, added to the gloom.

On the back of such negative evidence, business leaders led by Sir Richard Branson, the Virgin billionaire, and trade union chiefs both called for an interest rate cut. The expectation is that tomorrow the Bank's Monetary Policy Committee will reduce rates by at least 0.5%.