Why in the News
The Reserve Bank of India (RBI) conducted Open Market Operations (OMO) purchase of Government Securities worth ₹50,000 crore to inject liquidity into the banking system. Another tranche of ₹50,000 crore is scheduled shortly.
Key Highlights
- Amount purchased: ₹50,000 crore worth of Government Securities (G-Secs).
- Total planned purchase: ₹1,00,000 crore in two tranches.
- Maturity range of securities:
- 6.01% G-Sec maturing 2030
- 7.30% G-Sec maturing 2053
Purpose:
- Inject liquidity into the banking system.
- Offset liquidity shortage caused by advance tax payments.
- Ensure banks have sufficient funds for lending.
What are Open Market Operations (OMO)?
- Open Market Operations are a key monetary policy tool used by the RBI.
- Definition: Buying or selling government securities in the open market to regulate money supply and liquidity.
- If RBI buys G-Secs
- Injects liquidity
- Increases money supply
- Encourages lending
- If RBI sells G-Secs
- Absorbs liquidity
- Reduces money supply
Additional Measures
- The Government of India conducted a switch auction, buying back ₹6,309 crore of G-Secs and issuing ₹6,431 crore of new bonds.
- These operations help manage the government’s debt maturity profile.
| [2013] In the context of Indian economy, ‘Open Market Operations’ refers to: (a) borrowing by scheduled banks from the RBI (b) lending by commercial banks to industry and trade (c) purchase and sale of government securities by the RBI (d) None of the above |
