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Open market operation refers to
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- borrowing by commercial banks from the R.B.I.
- lending by scheduled banks to non-scheduled banks
- purchase and sale of Government securities by the R.B.I.
- purchase and sale of bonds and securities by the Central Govt.
- borrowing by commercial banks from the R.B.I.
Correct Option: C
Open Market Operations (OMO) is the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite. OMOs are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
