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    Question

    Open market operations, one of the monetary measures

    taken by RBI is:
    A Auction of gold Correct Answer Incorrect Answer
    B Issuance of corporate bonds Correct Answer Incorrect Answer
    C Sales and purchase of govt securities Correct Answer Incorrect Answer
    D Issuance of new currency notes Correct Answer Incorrect Answer
    E Foreign exchange operations to manage the value of rupee Correct Answer Incorrect Answer

    Solution

    Open Market Operations (OMO) refer to the purchase and sale of the Government securities by RBI. The objective of OMO is to adjust the rupee liquidity conditions in the economy on a durable basis. When RBI sells government security in the markets, the banks purchase them and the liquidity in the market reduces because the cash flows from market to RBI.

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