Consider the following statements:begin{enumerate}item RBI has lowered Statutory Liquidity Rate (SLR) by 0.50% in its June review.item Reduction in SLR helps in increasing credit availability in the market.end{enumerate} Which of the above statement(s) is/are correct?

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Consider the following statements:

A	by 0.50% in its June review.
B	is/are correct?
C	1 only
D	2 only
E	Either 1 or 2
F	Both 1 and 2

Explanation:

Detailed explanation-1: -By reducing the level of SLR, the RBI can increase liquidity with the commercial banks, resulting in increased investment. is is done to fuel growth and demand.

Detailed explanation-2: -The RBI regulates the SLR in its policy meetings with a view to keep a check on inflation and credit growth. An increase in SLR will help in containing inflation, while a decrease in SLR will facilitate economic growth. SLR is prescribed under the Banking Regulation Act, 1949.

Detailed explanation-3: -The correct answer is Scheduled commercial banks will cut their lending rates. Should the RBI reduce the statutory liquidity ratio by 50 basis points, then Scheduled commercial banks will cut their lending rates.

Detailed explanation-4: -The ratio of these liquid assets to the demand and time liabilities is called the Statutory Liquidity Ratio (SLR). The Reserve Bank of India (RBI) has the authority to increase this ratio by up to 40%. An increase in the ratio constricts the ability of the bank to inject money into the economy.

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