RBI announces special OMO of Rs 20,000 crore

RBI announces special OMO of Rs 20,000 crore

Part of: GS-Prelims and GS-III – Economy

In News:

• The RBI will conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for an aggregate amount of ₹20,000 crore in two tranches.
• It involves purchasing government securities of longer maturities and selling equal amount of securities of shorter maturities.

Important value additions 

 Open market operations 

• It is the sale and purchase of government securities and treasury bills by RBI. 
• Objective: To regulate the money supply in the economy.
• When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market. 
• It sells government securities to suck out liquidity from the system.
• Under OMO, RBI does not directly deal with the public.