RBI Conducts Open Market Operations to Increase Liquidity Context: The Reserve Bank of India (RBI) carried out Open Market Operations (OMO) by purchasing Government Securities (G-Secs) worth ₹50,000 crore to add liquidity to the banking system. Open Market Operations (OMO) Open Market Operations are monetary policy instruments used by the RBI to control the amount of liquidity in the financial system. Through OMOs, the RBI buys or sells Government Securities in the open market. Types of OMO OMO Purchase: When the RBI purchases government bonds from banks, money flows into the banking system, thereby increasing liquidity. OMO Sale: When the RBI sells government bonds to banks, money is taken out of circulation, helping to reduce excess liquidity in the market. Government Securities Government Securities are tradable financial instruments issued by the Central or State Governments to borrow funds from the market. Types of G-Secs Short-term securities: Known as Treasury Bills, which usually have a maturity period of less than one year. Long-term securities: Referred to as government bonds or dated securities, with maturity of one year or more. Issuance in India The Central Government issues both Treasury Bills and long-term bonds. State Governments issue only long-term securities, commonly called State Development Loans (SDLs).
