When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
India's GDP growth rate increases drastically
Foreign Institutional Investors may bring more capital into our country
Scheduled Commercial Banks may cut their lending rates
It may drastically reduce the liquidity to the banking system
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC IAS – 2015
SLR is the percentage of Net Demand and Time Liabilities (NDTL) that commercial banks must maintain as liquid assets (cash, gold, government securities). Reducing SLR means banks are required to hold a smaller proportion of their deposits in these prescribed liquid assets. This frees up a larger amount of funds that banks can use for lending to the public and businesses.