RBI to conduct simultaneous purchase and sale of G-Secs

RBI to conduct simultaneous purchase and sale of G-Secs

Subject : Economics

Context : The Reserve Bank of India on Thursday said it will conduct simultaneous purchase and sale of government securities (G-Secs) under Open Market Operations (OMO) for an aggregate amount of ₹10,000 crores each on December 30.

Concept :

Open Market Operations

• Open market operations is the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
• The objective of OMO is to regulate the money supply in the economy.
• RBI carries out the OMO through commercial banks and does not directly deal with the public.
• When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.