Indian Economy -Civil Service Gurukul

15 Sep 2017 06:21

About Open market operations:

Open market operations are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.The central bank sells g-secs to suck out liquidity from the system and buys back g-secs to infuse liquidity into the system.These operations are often conducted on a day-to-day basis in a manner that balances inflation while helping banks continue to lend.The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.