BANKING AFFAIRS

Detailed explanation-1: -2.1 Open Market Operations (OMO) means the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite.

Detailed explanation-2: -Open Market Operations means sale and purchase of bonds and securities to the commercial banks by the RBI.

Detailed explanation-3: -Open Market Operations refers to the buying and selling of Government securities in the open market. This purchase and sale are entrusted to the Central bank (RBI) on behalf of the Government. When RBI buys a Government bond in the open market, it pays for it by giving a cheque.

Detailed explanation-4: -Outright OMOs are permanent in nature: when the central bank buys these securities (thus injecting money into the system), it is without any promise to sell them later. Similarly, when the central bank sells these securities (thus withdrawing money from the system), it is without any promise to buy them.

Detailed explanation-5: -Buying and selling of government securities by the central bank from or to the public and banks are known as open market operations.