Open Market Operations (OMO)
Direct market-based tools used by RBI involving government securities.
Introduction
Open Market Operations are direct market-based tools used by RBI.
Meaning of OMO
RBI buys or sells government securities in the open market.
Purchase of Securities
Injects liquidity into the banking system.
Sale of Securities
Absorbs excess liquidity from banks.
Role in Monetary Control
OMOs help manage long-term liquidity and interest rates.
Conclusion
OMOs are powerful instruments for managing systemic liquidity.