In the context of Indian economy, ‘Open Market Operations’ refers to:
Answer & explanation
Answer: (c) Purchase and sale of government securities by the RBI
Open Market Operations (OMO) are a monetary policy tool. The RBI buys or sells government securities in the open market to change the amount of money (liquidity) in the banking system. Buying adds money and selling removes it.
- ✓ (c) OMO is the buying and selling of government bonds in the open market, carried out by the central bank on the government's behalf. When the RBI buys these securities, bank reserves and money supply rise. When it sells them, reserves and money supply fall.
- ✗ (a) Banks borrowing from the RBI is a different tool. It works through the repo rate, the bank rate or liquidity windows, not through open market operations.
- ✗ (b) Commercial bank lending to industry and trade is ordinary bank credit. It is not a central bank policy operation.
- ✗ (d) Option (c) is correct, so 'None of the above' cannot be right.
Remember · OMO means the RBI buying (injects liquidity) or selling (absorbs liquidity) government securities. It is a quantitative tool, like CRR and bank rate.
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 3 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 3 “Open Market Operations refers to buying and selling of bonds issued by the Government in the open market. This purchase and sale is entrusted to the Central bank on behalf of the Government.”
- RBI press release: RBI announces measures to manage liquidity conditions (27 Jan 2025) ↗ “OMO purchase auctions of Government of India securities for an aggregate amount of ₹60,000 crore in three tranches of ₹20,000 crore each”
Question: UPSC Civil Services (Preliminary) 2013, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
