Q. Consider the following statements:
1.Open Market Operations (OMOs) are conducted by the RBI to regulate liquidity by buying or selling government securities.
2.In an OMO purchase, liquidity is absorbed from the system as banks pay the RBI for securities.
Which of the statements given above is/are correct?
Answer: A
Notes:
Explanation:
- Statement 1 is correct — OMOs are RBI’s tool to regulate liquidity using government securities.
- Statement 2 is incorrect — In an OMO purchase, the RBI buys securities and injects liquidity into the system.
Source- TH
