RBI announces Rs 10,000 crore Open Market Operations(OMO)

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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.

Facts:

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.