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RBI-Open-Market Operations (OMO) : Capital Flows Reserve Bank of India

The Reserve Bank of India uses open market operations (OMO) as its primary means of controlling market liquidity and interest rates, which involves buying and selling government securities. Prior to 1991, it relied more on cash reserve ratios and statutory liquidity ratios, but since reforms it emphasizes OMO more. The two main types of OMO used are outright purchases and repurchase agreements.

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45 views1 page

RBI-Open-Market Operations (OMO) : Capital Flows Reserve Bank of India

The Reserve Bank of India uses open market operations (OMO) as its primary means of controlling market liquidity and interest rates, which involves buying and selling government securities. Prior to 1991, it relied more on cash reserve ratios and statutory liquidity ratios, but since reforms it emphasizes OMO more. The two main types of OMO used are outright purchases and repurchase agreements.

Uploaded by

Aayush
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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RBI-Open-Market Operations [OMO]

INTRODUCTION
Open market operations is the sale and purchase of government
securities and treasury bills by RBI or the central bank of the
country.1 India’s Open Market Operation is much influenced by the fact
that it is a developing country and that the capital flows are very different
from those in developed countries. Thus India's central bank, the Reserve
Bank of India (RBI), has to make policies and use instruments
accordingly. Prior to the 1991 financial reforms, RBI’s major source of
funding and control over credit and interest rates was the cash reserve
ratio (CRR) and the SLR (Statutory Liquidity Ratio). But after the reforms,
the use of CRR as an effective tool was deemphasized and the use of
open market operations increased. OMOs are more effective in adjusting
[market liquidity].

TYPES OF OPEN MARKET OPERATIONS USED BY RBI


 Outright purchase (PEMO)
 Repurchase Agreement (REPO)

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//economictimes.indiatimes.com/articleshow/66291857.cms?
from=mdr&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.

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