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

1. The Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that Scheduled Commercial Banks have to maintain as liquid assets (like cash, gold, or government securities). 2. When the Reserve Bank of India (RBI) reduces the SLR, banks are required to hold a smaller portion of their deposits in these liquid assets. 3. This reduction frees up funds for the banks, increasing their lendable resources, i.e., it increases liquidity in the banking system (making Option D incorrect). 4. With more funds available to lend, banks may compete to attract borrowers by reducing their lending rates. Hence, Option (C) is the most likely consequence. 5. Option (A) is unlikely; while increased lending can potentially boost economic activity, a 50 basis points cut in SLR is unlikely to cause a 'drastic' increase in India's GDP growth rate. 6. Option (B) is incorrect; decisions by Foreign Institutional Investors (FIIs) are primarily influenced by factors like interest rate differentials, macroeconomic stability, and global risk appetite, rather than a domestic SLR cut.