Question map
Not attempted Correct Incorrect ★ Bookmarked
Loading…
Q100 (IAS/2013) Economy › Money, Banking & Inflation › Monetary policy tools Answer Verified

In the context of Indian economy, ‘Open Market Operations’ refers to

Result
Your answer: —  ·  Correct: C
Explanation

In the Indian economy, Open Market Operations (OMOs) refer to the purchase and sale of government securities (G-Secs) by the Reserve Bank of India (RBI) in the open market [1]. This mechanism is a key monetary policy tool used to regulate durable liquidity and manage inflation [2]. When the RBI buys government bonds, it injects liquidity into the banking system, increasing the money supply and potentially lowering interest rates [2]. Conversely, when the RBI sells these securities, it absorbs excess liquidity from the economy to control inflationary pressures [1]. These operations can be 'outright,' which are permanent transactions, or temporary repo/reverse repo transactions [1]. While commercial banks and financial institutions participate in these trades, the primary objective is the central bank's management of the money supply and interest rate benchmarks [4].

Sources

  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > The following are the major instruments/tools that RBI uses for conducting its monetary policy: > p. 63
  2. [2] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > 3.4 POLICY TOOLS TO CONTROL MONEY SUPPLY > p. 42
  3. [4] https://www.federalreserve.gov/monetarypolicy/openmarket.htm
How others answered
Each bar shows the % of students who chose that option. Green bar = correct answer, blue outline = your choice.
Community Performance
Out of everyone who attempted this question.
71%
got it right
✓ Thank you! We'll review this.

SIMILAR QUESTIONS

IAS · 2024 · Q40 Relevance score: 1.22

With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of :

IAS · 2015 · Q86 Relevance score: 0.62

With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are component/components of Monetary Policy?

IAS · 2020 · Q40 Relevance score: -0.03

With reference to the Indian economy, consider the following statements : 1. 'Commercial Paper' is a short-term unsecured promissory note. 2. 'Certificate of Deposit' is a long-term instrument issued by the Reserve Bank of India to a corporation. 3. 'Call Money' is a short-term finance used for interbank transactions. 4. 'Zero-Coupon Bonds' are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations. Which of the statements given above is/are correct ?

IAS · 2022 · Q100 Relevance score: -0.45

With reference to the Indian economy, consider the following statements: 1. A share of the household financial savings goes towards government borrowings. 2. Dated securities issued at market-related rates in auctions form a large component of internal debt. Which of the above statements is/are correct?

IAS · 2021 · Q25 Relevance score: -0.82

In India, the central bank's function as the 'lender of last resort' usually refers to which of the following? 1. Lending to trade and industry bodies when they fail to borrow from other sources 2. Providing liquidity to the banks having a temporary crisis 3. Lending to governments to finance budgetary deficits Select the correct answer using the code given below.