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Question

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
(a) India's GDP growth rate increases drastically
(b) Foreign Institutional Investors may bring more capital into our country
(c) Scheduled Commercial Banks may cut their lending rates
(d) It may drastically reduce the liquidity to the banking, system

Answer:

C

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Explanation:

When the Reserve Bank of India (RBI) reduces the Statutory Liquidity Ratio (SLR) by 50 basis points, scheduled commercial banks may cut their lending rates. This is because the lower SLR requirement gives banks more flexibility in utilizing their funds, allowing them to increase lending and potentially stimulate borrowing and investment in the economy.

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