Banking Exams Exam > Banking Exams Questions > Open market operations, one of the measures ...
Start Learning for Free
Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, mean
- a)sale or purchase of government securities
- b)issuance of different types of bonds
- c)auction of gold
- d)to make available the direct finance to borrowers
- e)None of these
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Open market operations, one of the measures taken by the RBI in order...
< b="" />Introduction:< />
Open market operations (OMOs) are one of the measures taken by the Reserve Bank of India (RBI) to control credit expansion in the economy. It involves the buying and selling of government securities in the open market.
< b="" />Explanation:< />
- OMOs primarily involve the sale or purchase of government securities. When the RBI sells government securities, it absorbs liquidity from the market, thereby reducing the money supply. Conversely, when the RBI purchases government securities, it injects liquidity into the market, increasing the money supply.
- The RBI conducts OMOs through auctions, where it sells or buys government securities to or from banks, financial institutions, and other market participants. The auctions are conducted at prevailing market interest rates, and the RBI announces the amount and tenor of the securities it intends to buy or sell.
- By conducting OMOs, the RBI influences the level of liquidity in the economy. When it wants to restrict credit expansion, it sells government securities, reducing the funds available for lending in the banking system. Conversely, when it wants to stimulate credit growth, it buys government securities, injecting funds into the banking system.
- OMOs help the RBI in controlling key monetary variables like interest rates, inflation, and exchange rates. By adjusting the money supply, the RBI can influence interest rates in the economy. When it wants to tighten monetary policy, it sells government securities, increasing interest rates. Conversely, when it wants to ease monetary policy, it buys government securities, reducing interest rates.
- OMOs are an important tool for the RBI to manage liquidity in the banking system and control credit expansion. They help in maintaining price stability, promoting economic growth, and ensuring the smooth functioning of financial markets.
- OMOs are considered an indirect method of providing finance to borrowers. By influencing interest rates and liquidity in the economy, the RBI indirectly affects the availability of credit to borrowers. However, OMOs do not directly provide finance to borrowers.
< b="" />Conclusion:< />
Open market operations (OMOs) involve the sale or purchase of government securities by the RBI to control credit expansion in the economy. It is an important tool for managing liquidity, influencing interest rates, and maintaining price stability. OMOs indirectly affect the availability of credit to borrowers but do not directly provide finance to them.
Open market operations (OMOs) are one of the measures taken by the Reserve Bank of India (RBI) to control credit expansion in the economy. It involves the buying and selling of government securities in the open market.
< b="" />Explanation:< />
- OMOs primarily involve the sale or purchase of government securities. When the RBI sells government securities, it absorbs liquidity from the market, thereby reducing the money supply. Conversely, when the RBI purchases government securities, it injects liquidity into the market, increasing the money supply.
- The RBI conducts OMOs through auctions, where it sells or buys government securities to or from banks, financial institutions, and other market participants. The auctions are conducted at prevailing market interest rates, and the RBI announces the amount and tenor of the securities it intends to buy or sell.
- By conducting OMOs, the RBI influences the level of liquidity in the economy. When it wants to restrict credit expansion, it sells government securities, reducing the funds available for lending in the banking system. Conversely, when it wants to stimulate credit growth, it buys government securities, injecting funds into the banking system.
- OMOs help the RBI in controlling key monetary variables like interest rates, inflation, and exchange rates. By adjusting the money supply, the RBI can influence interest rates in the economy. When it wants to tighten monetary policy, it sells government securities, increasing interest rates. Conversely, when it wants to ease monetary policy, it buys government securities, reducing interest rates.
- OMOs are an important tool for the RBI to manage liquidity in the banking system and control credit expansion. They help in maintaining price stability, promoting economic growth, and ensuring the smooth functioning of financial markets.
- OMOs are considered an indirect method of providing finance to borrowers. By influencing interest rates and liquidity in the economy, the RBI indirectly affects the availability of credit to borrowers. However, OMOs do not directly provide finance to borrowers.
< b="" />Conclusion:< />
Open market operations (OMOs) involve the sale or purchase of government securities by the RBI to control credit expansion in the economy. It is an important tool for managing liquidity, influencing interest rates, and maintaining price stability. OMOs indirectly affect the availability of credit to borrowers but do not directly provide finance to them.
Free Test
FREE
| Start Free Test |
Community Answer
Open market operations, one of the measures taken by the RBI in order...
Open market operations mean sale or purchase of government securities.
|
Explore Courses for Banking Exams exam
|
|
Top Courses for Banking ExamsView all
Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer?
Question Description
Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? for Banking Exams 2025 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Banking Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer?.
Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? for Banking Exams 2025 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Banking Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Banking Exams.
Download more important topics, notes, lectures and mock test series for Banking Exams Exam by signing up for free.
Here you can find the meaning of Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Open market operations, one of the measures taken by the RBI in order to control credit expansion in the economy, meana)sale or purchase of government securitiesb)issuance of different types of bondsc)auction of goldd)to make available the direct finance to borrowerse)None of theseCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice Banking Exams tests.
|
|
Explore Courses for Banking Exams exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup