Consider the following statements with regards to Open Market Operations 1 The operation is meant fo...........

Indian Economy (Easy) Money and banking

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Consider the following statements with regards to Open Market Operations:

1. The operation is meant for sale or purchase of government securities (g-secs).

2. It is meant to infuse or drain excess liquidity from the market.

Which of the statement(s) given above is/ are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Both Statements 1 and 2 are Correct.
The Open market operations are conducted by the RBI by way of sale or purchase of government securities (g-secs) to adjust money supply conditions.
The operation is meant to infuse or drain excess liquidity from the market. The central bank is expected to aggressively deploy open market operations (OMO) to release money into the market.