Q. Consider the following statements regarding the Open Market Operations (OMOs):
1. These are the market operations conducted by the RBI by way of sale/ purchase of Government Securities to/ from the market.
2. RBI resorts to purchase of securities if there is excess liquidity in the market.
Which of the statements given above is/are correct?
Answer: A
Notes:
Open Market Operations (OMOs) are the market operations conducted by the RBI by way of sale/ purchase of G-Secs to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
Source: ForumIAS
