Monetary policy implications

Reducing the Statutory Liquidity Ratio (SLR) increases the amount of funds available to banks for lending, as they need to maintain less liquid assets with the RBI. This increases liquidity in the banking system and typically allows banks to reduce their lending rates to remain competitive. Option (a) is incorrect as GDP growth depends on multiple factors beyond SLR changes. Option (b) is not a direct consequence of SLR reduction. Option (d) is contradictory—reducing SLR increases, not decreases, liquidity in the banking system. When banks have more funds available, they can pass on the benefits to borrowers through lower interest rates. > SLR reduction expands loanable funds; banks respond by competitive rate cuts. Answer: (c).