{"id":91260,"date":"2025-06-01T10:51:19","date_gmt":"2025-06-01T10:51:19","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91260"},"modified":"2025-06-01T10:51:19","modified_gmt":"2025-06-01T10:51:19","slug":"when-the-reserve-bank-of-india-reduces-the-statutory-liquidity-ratio-b","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/when-the-reserve-bank-of-india-reduces-the-statutory-liquidity-ratio-b\/","title":{"rendered":"When the Reserve Bank of India reduces the Statutory Liquidity Ratio b"},"content":{"rendered":"

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?<\/p>\n

[amp_mcq option1=”India’s GDP growth rate increases drastically” option2=”Foreign Institutional Investors may bring more capital into our country” option3=”Scheduled Commercial Banks may cut their lending rates” option4=”It may drastically reduce the liquidity to the banking system” correct=”option3″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2015<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nWhen the Reserve Bank of India reduces the Statutory Liquidity Ratio (SLR), scheduled commercial banks are likely to cut their lending rates.
\n<\/section>\n
\nSLR 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.
\n<\/section>\n
\nIncreased availability of funds for lending typically leads to increased competition among banks to disburse loans. This increased supply of loanable funds, assuming demand remains constant or increases moderately, puts downward pressure on interest rates, making it more likely for scheduled commercial banks to cut their lending rates. Options A, B, and D are less direct or incorrect consequences. Drastic GDP growth is not guaranteed. FII capital inflows are complex and influenced by many factors. Reducing SLR increases, not reduces, the liquidity available for lending in the banking system.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen? [amp_mcq option1=”India’s GDP growth rate increases drastically” option2=”Foreign Institutional Investors may bring more capital into our country” option3=”Scheduled Commercial Banks may cut their lending rates” option4=”It may drastically reduce the liquidity to … <\/p>\n

Detailed SolutionWhen the Reserve Bank of India reduces the Statutory Liquidity Ratio b<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1443,1120,1121],"class_list":["post-91260","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1443","tag-economic-development","tag-planning","no-featured-image-padding"],"yoast_head":"\nWhen the Reserve Bank of India reduces the Statutory Liquidity Ratio b<\/title>\n<meta name=\"description\" content=\"When the Reserve Bank of India reduces the Statutory Liquidity Ratio (SLR), scheduled commercial banks are likely to cut their lending rates. 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.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/when-the-reserve-bank-of-india-reduces-the-statutory-liquidity-ratio-b\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"When the Reserve Bank of India reduces the Statutory Liquidity Ratio b\" \/>\n<meta property=\"og:description\" content=\"When the Reserve Bank of India reduces the Statutory Liquidity Ratio (SLR), scheduled commercial banks are likely to cut their lending rates. 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. 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