When the Reserve Bank of India reduces the Statutory Liquidity by 50 basis points, which of the following is likely to happen?

examrobotsa's picture

Submitted by examrobotsa on

Q: 72 (IAS/2015)
When the Reserve Bank of India reduces the Statutory Liquidity by 50 basis points, which of the following is likely to happen?
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do ? 1. Cut and optimize the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate Q. Select the correct answer using the code given below : (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,213,53,13,17,213,23

keywords: 

{'statutory liquidity': [0, 0, 0, 1], 'liquidity': [0, 0, 0, 4], 'reserve bank': [1, 0, 3, 4], 'commercial banks': [0, 0, 1, 1], 'banking system': [0, 0, 0, 1], 'lending rates': [0, 0, 0, 1], 'gdp growth rate increases': [0, 0, 0, 1], 'more capital': [0, 0, 0, 2], 'foreign institutional investors': [0, 1, 1, 3], 'basis points': [0, 0, 0, 1]}

When the Reserve Bank of India (RBI) reduces the Statutory Liquidity Ratio (SLR) by 50 basis points, it is likely to result in Scheduled Commercial Banks cutting their lending rates. SLR is the percentage of deposits that banks are required to maintain in the form of liquid assets such as cash, gold, or government securities. A reduction in SLR frees up liquidity for banks, enabling them to lend more to borrowers. As a result, banks may lower their lending rates, making loans more affordable for businesses and individuals. The other options mentioned in the question are not directly related to a reduction in SLR.