In the context of Indian economy, ‘Open Market Operations’ refers to
[UPSC Civil Services Exam – 2013 Prelims]
(a) borrowing by scheduled banks from the RBI
(b) lending by commercial banks to industry and trade
(c) purchase and sale of government securities by the RBI
(d) None of the above
- Open Market Operations (OMOs) are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
- If there is excess liquidity, RBI resorts to the sale of securities and sucks out the rupee liquidity.
- It is one of the quantitative (to regulate or control the total volume of money) monetary policy tools that are employed by the central bank of a country to control the money supply in the economy.
- Hence the correct option is 3.