OMO is a quantitative monetary policy tool used by the central bank to manage liquidity in the economy. When the RBI buys government securities from the market, it injects liquidity (money supply increases). When it sells government securities, it absorbs liquidity (money supply decreases).
In the context of Indian economy, 'Open Market Operations' refers to
Asked in UPSC IAS 2013 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
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Answer: C. purchase and sale of government securities by the RBI
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