News:The Reserve Bank of India(RBI) has announced Rs 10,000 crore open market operations in a bid to increase liquidity and enhance confidence in the market amid the coronavirus crisis.
About Open Market Operations(OMO):
- Open market operations is the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
- Objective: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.