BANKING AFFAIRS

Detailed explanation-1: -An Open Market Operation (OMO) is the buying and selling of government securities in the open market, hence the nomenclature. It is done by the central bank in a country (the RBI in India). When the central bank wants to infuse liquidity into the monetary system, it will buy government securities in the open market.

Detailed explanation-2: -open-market operation, any of the purchases and sales of government securities and sometimes commercial paper by the central banking authority for the purpose of regulating the money supply and credit conditions on a continuous basis.

Detailed explanation-3: -Open-market operations refer to: the purchase or sale of government securities by the Fed. The purchase of government securities from the public by the Fed will cause: the money supply to increase.

Detailed explanation-4: -Open market operations can be permanent or temporary. The permanent type of OMO involves the outright purchase (or sale) of securities. Temporary OMOs involve buying or selling securities with the agreement to reverse the transaction in the near future.