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 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.
Open Market Operation (OMO) is buying or selling of government securities conducted by RBI to manage the liquidity conditions in the market and may support government market borrowing.
It’s one of the major instruments of monetary policy by which the RBI infuses liquidity in the market and can be used in sterilization of capital flows (managing excess inflow of capital).
Effective instruments for OMOs are Liquidity Adjustment Facility (LAF) to manage liquidity and Market Stabilization Scheme (MSS) to manage long term excess liquidity.
Two rates constitute the LAF system, Repo and Reverse Repo rate. Repo rate is used for daily injection of liquidity and reverse repo is used for daily absorption of securities.
Securities purchased and sold in OMOs are dated securities, T bills.
Presently because of the liquidity deficit RBI is resorting to purchasing bonds from the market.
Open Market Operation (OMO) is buying or selling of government securities conducted by RBI to manage the liquidity conditions in the market and may support government market borrowing.
It’s one of the major instruments of monetary policy by which the RBI infuses liquidity in the market and can be used in sterilization of capital flows (managing excess inflow of capital).
Effective instruments for OMOs are Liquidity Adjustment Facility (LAF) to manage liquidity and Market Stabilization Scheme (MSS) to manage long term excess liquidity.
Two rates constitute the LAF system, Repo and Reverse Repo rate. Repo rate is used for daily injection of liquidity and reverse repo is used for daily absorption of securities.
Securities purchased and sold in OMOs are dated securities, T bills.
Presently because of the liquidity deficit RBI is resorting to purchasing bonds from the market.