Open Market Operations is a tool used by RBI to manage money supply Which of following is incorrect ...........

Economic Affairs Money Supply and Monetary Policy

Open Market Operations is a tool used by RBI to manage money supply. Which of following is incorrect about OMO?

RBI performs OMOs considering the targets for various economic parameters such as interest rates, exchange rates or inflation

OMOs are deemed comparably effective in correcting market liquidity compared to SLR

In case of securities sale by the RBI, money supply increases in the market with increase in the monetary base

RBI can engage in securities sale or purchase with a condition to repurchase.

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Explanation:

3rd option is incorrect.
Sale of securities by central bank reduces the reserves of commercial banks. It adversely affects the bank’s ability to create credit and therefore decrese the money supply in the economy.
Open market operations (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system, facilitated by the Federal Reserve (Fed).