OPEN MARKET OPERATION
- November 6, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject : Economics
Context : The Reserve Bank of India has said that it will continue to conduct Open Market Operation purchase of 20,000 cr rupees as well as OMO’s in State Development Loans.
Concept :
- 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 sale of securities and sucks out the rupee liquidity.
- Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market.
- It is one of the quantitative (to regulate or control the total volume of money) monetary policy tools which is employed by the central bank of a country to control the money supply in the economy.