Economics • Indian EconomyMedium
What is the primary purpose of the 'Open Market Operations (OMOs)' conducted by the Reserve Bank of India?
A. The purchase and sale of government securities by the central bank to regulate rupee liquidity conditions in the economy.✓ Correct Answer
B. The direct intervention in foreign exchange markets to prevent extreme volatility in currency exchange rates.
C. The auctioning of gold bonds and sovereign treasury bills to retail investors.
D. The trading of corporate bonds on recognized stock exchanges on behalf of public sector undertakings.
💡 Solution & Explanation
Open Market Operations are core monetary policy instruments where the Reserve Bank of India buys or sells government securities to regulate rupee liquidity conditions in the economy. They are distinct from direct foreign exchange interventions managed through the exchange rate mechanism. This mechanism is central to understanding central bank liquidity management.
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