UPSC CSE Prelims

Correct Option: C Explanation: Lowering the statutory liquidity ratio releases some funds previously tied to liquid assets, potentially allowing banks to expand credit and reduce lending rates. Option-wise Analysis: A: Incorrect - An SLR cut alone cannot cause an immediate drastic GDP growth increase. B: Incorrect - Foreign portfolio inflows depend on multiple factors, not automatically on a small SLR cut. C: Correct - With more lendable resources, banks may lower lending rates if conditions permit. D: Incorrect - Cutting SLR normally eases liquidity constraints rather than drastically reducing banking liquidity.