Economics • Banking & FinanceEasy
What is the primary objective of Open Market Operations conducted by the central bank?
A. Regulating liquidity in the banking system by buying or selling government securities✓ Correct Answer
B. Fixing foreign exchange reserves for import financing
C. Issuing currency notes in various denominations
D. Auditing balance sheets of cooperative credit societies
💡 Solution & Explanation
Open Market Operations involve the buying and selling of government securities by the central bank in the open market to expand or contract the amount of money in the banking system. Selling securities absorbs excess liquidity, while purchasing them injects funds. Currency note issuance is governed by reserve requirements under the Reserve Bank of India Act.
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