- SLR is a monetary policy tool used by RBI to control credit growth and liquidity. - Reducing SLR decreases the amount of funds banks must set aside, making more money available for lending to the economy. - Increased availability of funds for lending typically puts downward pressure on lending rates (cost of borrowing).
Should the RBI reduce the statutory liquidity ratio by 50 basis points, then :
Asked in HAS Prelims 2019 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
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Answer: C. Scheduled commercial banks will cut their lending rates.
More Economic Development questions
- Reserve Bank of India raised the repo rate by 40 basis points in May 2022. Now consider the following statements: 1. Repo rates are increased to control inflation. 2. With increase in repo rates, cost of borrowing money increases. 3. With reduction in repo rates, Industry gets loans at higher rates from the lender. 4. To decrease money supply in the economy, the RBI hikes up repo rates to encourage banks for borrowing funds. Select the correct statements using the code given below :
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