When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?

The Statutory Liquidity Ratio (SLR) is a monetary policy tool used by the Reserve Bank of India (RBI). It mandates commercial banks to maintain a certain percentage of their Net Demand and Time Liabilities (NDTL) in the form of liquid assets like cash, gold, or approved securities. When the RBI reduces the SLR by 50 basis points (0.50%), it means banks are now required to set aside a smaller proportion of their deposits as reserves. This reduction frees up more funds for the scheduled commercial banks to lend to the public. With increased liquidity and more funds available for credit, banks typically face less pressure on their funds, making them more likely to cut their lending rates to attract borrowers and increase their loan book. This move aims to stimulate credit growth in the economy.