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RBI advances second portion of OMO

Part of: GS Prelims and GS-III – Economy

In News:

The Reserve Bank of India (RBI) has advanced its liquidity infusion plan by purchasing government bonds.
The RBI has announced open market operations (OMOs) of Rs. 30,000 crore in March 2020.

Value Addition

About Open market operations (OMOs)

Open market operations are the sale and purchase of government securities and treasury bills by RBI or the central bank of the country.
The objective of OMO is 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 and it sells government securities to suck out liquidity from the system.

RBI carries out the OMO through commercial banks.

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