WBCS.LIVE practice question

In the context of the Indian economy, 'Open Market Operations' specifically refers to:

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Borrowing by scheduled banks from the Reserve Bank of India.
  2. Borrowing by scheduled banks from the Reserve Bank of India.
  3. Buying and selling of government securities by the RBI.
  4. Deposit mobilization by cooperative banks.

Correct answer and explanation

Correct answer: Buying and selling of government securities by the RBI.

Explanation: āœ… Correct Answer: C) Buying and selling of government securities by the RBI. šŸ“š Explanation: Open Market Operations (OMO) refer to the buying and selling of government securities in the open market by the Reserve Bank of India. The primary objective of OMO is to effectively regulate the total money supply and liquidity conditions within the banking system. Buying securities injects liquidity into the economy, while selling them strategically absorbs excess liquidity to control inflation.