Answer: Option A
Answer: (a)
Open Market Operations (OMOs) are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
When the RBI feels there is excess liquidity in the market, it resorts to the sale of securities thereby sucking out the rupee liquidity.
Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.
The two traditional types of OMO’s used by RBI are:
Outright purchase (PEMO): Is outright buying or selling of government securities; and
Repurchase agreement (REPO): This is the short term, and are subject to repurchase.