In the context of the Indian economy, Open Market Operations’ refers to

1. borrowing by scheduled banks from the RBI
2. lending by commercial banks to industry and trade
3. purchase and sale of government securities by the RBI
4. None of the above

Explanation

Option (c) is correct

• OMO is a monetary policy tool central banks use to control money supply and interest rates. It involves the purchasing and selling of government securities (G-Sec) in the open market.
• When a central bank buys G-Secs, it injects money/liquidity into the economy.
• When the central bank sells G-Secs, it drains money/liquidity from the economy.

Answer: (c) purchase and sale of government securities by the RBI; Difficulty Level: Easy