Open Market Operations(OMO) It is the sale and purchase of | UPSCMainsZone

Open Market Operations(OMO)

It is the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.

Aim: To adjust the rupee liquidity conditions in the market on a durable basis.

The central bank carries out the OMO through commercial banks and does not directly deal with the public.

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.

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