HPSC HCS 2017 · Question 81 of 100

Should the RBI reduce the statutory liquidity ratio by 50 basis points, then:

Indian Economy

AIndia's GDP will increase dramatically
BForeign institutional investors will bring in more capital
CScheduled commercial banks will cut their lending ratesCorrect
DLiquidity in the banking system will be drastically reduced.

Answer: C. Scheduled commercial banks will cut their lending rates

Explanation

Cutting the SLR frees funds with banks, increasing liquidity and typically leading scheduled commercial banks to cut lending rates.

Source: Question text: HPSC HCS (Ex.Br.) Prelims GS Paper-I held 31-Mar-2019 (Drishti IAS official-paper transcription; cross-checked with Abhimanu IAS Set-D solved paper). Answers: official HPSC Series-D answer key.

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