Which of the following is a direct consequence of a decrease in the SLR?
Practice Questions
Q1
Which of the following is a direct consequence of a decrease in the SLR?
Increased liquidity for banks
Higher interest rates for loans
Decreased money supply in the economy
Lower inflation rates
Questions & Step-by-Step Solutions
Which of the following is a direct consequence of a decrease in the SLR?
Step 1: Understand what SLR means. SLR stands for Statutory Liquidity Ratio, which is the percentage of a bank's net demand and time liabilities that must be maintained in liquid assets.
Step 2: Recognize that a decrease in SLR means banks are required to hold less liquid assets.
Step 3: Realize that when banks hold less in liquid assets, they have more money available to lend to customers.
Step 4: Conclude that with more money available to lend, banks can increase their lending activities.
Step 5: Understand that increased lending by banks can lead to more liquidity in the economy.
