Full form of OMO is Open Market Operations. Open Market Operations is a monetary policy instrument used by the RBI. Selling and buying of Government securities in the Open Market is known as Open Market Operation. You can read about the RBI – Reserve Bank of India [UPSC Indian Economy Notes] in the given link.
This method is used by the RBI when it wants to infuse liquidity into the market. For adjusting the liquidity in the market, this method has gained more importance after the economic reforms done in 1991. Buying Government securities will help in infusing liquidity into the monetary system.
Further readings:
- Monetary Policy – Objectives, Roles and Instruments
- Open Market Operation (OMO) – Two Kinds, REPO and PEMO
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