Open Market Operations(OMO)

  1. The Reserve Bank of India (RBI)’s surplus for 2018-19 was higher than the surplus in recent years.This was due to the large amount of open market operations(OMOs) conducted by the central bank during the year.
  2. Open market operations is the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
  3. The objective of OMO is to regulate the money supply in the economy. The central bank carries out the OMO through commercial banks and does not directly deal with the public.
  4. When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to out liquidity from the system.