OPEN MARKET OPERATIONS (OMOs)

About:

• Open Market Operations (OMO) are the market operations conducted by the RBI. In this it conducts sale/purchase of Government securities (G-secs) to/from the market.
  
  
• Objective behind conducting It is to adjust the rupee liquidity conditions in the market on a durable basis.
  • When the RBI feels 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, the RBI will buy securities from the market, thereby releasing liquidity into the market.
    
    
  
  
  
• The RBI uses OMO along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.