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: -What is open market operations by RBI? Open Market Operations is the simultaneous sale and purchase of government securities and treasury bills by RBI. 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.

Detailed explanation-3: -Open market operations refer to the selling and purchasing of the treasury bills and government securities by the central bank of any country in order to regulate money supply in the economy. It is one of the most important ways of monetary control that is exercised by the central banks.

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.