When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen ?
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A.
India's GDP growth rate increases drastically
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B.
Foreign Institutional Investors may bring more capital into our country
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C.
Scheduled Commercial Banks may cut their lending rates.
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D.
It may drastically reduce the liquidity to the banking system
Correct Answer:
C. Scheduled Commercial Banks may cut their lending rates.
Explanation:
When the Reserve Bank of India reduces the Statutory Liquidity Ratio (SLR) by 50 basis points, scheduled commercial banks have more funds available to lend because they are required to keep a smaller proportion of their deposits in liquid assets such as government securities. This typically enables banks to cut their lending rates due to increased liquidity and competition in the lending market.
Therefore, the most likely outcome is (c) Scheduled Commercial Banks may cut their lending rates
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