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Consider the following statements:
Under the Open Market Operations (OMOs), the RBI may either purchase or sell G-Secs depending upon the market conditions but under the G-SAP, the RBI would only be purchasing G-Secs.
  • The RBI uses OMOs either to inject or suck out excess liquidity depending upon the liquidity conditions but, the G-SAP is mainly used for controlling the yield rates on the long term G-Secs.
    Which of the statements given above is/are correct?
    • a)
      1 only
    • b)
      2 only
    • c)
      Both 1 and 2
    • d)
      Neither 1 nor 2
    Correct answer is option 'C'. Can you explain this answer?
    Most Upvoted Answer
    Consider the following statements: Under the Open Market Operations...
    Explanation:

    Open Market Operations (OMOs) and G-Sec Acquisition Programme (G-SAP) are two tools used by the Reserve Bank of India (RBI) for managing liquidity in the economy.

    OMOs:

    - Under OMOs, the RBI can either purchase or sell government securities (G-Secs) in the open market.
    - The decision to purchase or sell G-Secs depends upon the market conditions.
    - OMOs are used to inject or suck out excess liquidity from the economy, depending upon the liquidity conditions.
    - OMOs are generally used for short-term liquidity management.

    G-SAP:

    - G-SAP is a new tool introduced by the RBI in April 2021.
    - Under G-SAP, the RBI only purchases G-Secs from the market.
    - The main objective of G-SAP is to control the yield rates on long-term G-Secs.
    - G-SAP is used for managing the government's borrowing program and ensuring a smooth yield curve.

    Conclusion:

    Both the statements given in the question are correct. OMOs and G-SAP are both tools used by the RBI for managing liquidity in the economy, but they have different objectives. While OMOs are used for short-term liquidity management, G-SAP is used for managing the government's borrowing program and ensuring a smooth yield curve.
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    Community Answer
    Consider the following statements: Under the Open Market Operations...
    • G-SAP: RBI purchased G-secs (including state development loans) amounting to Rs. 1 lakh crore under G-SAP 1.0 and Rs 1.2 lakh crore under G-SAP 2.0.
    • G-SAP is a special kind of Open Market Operations (OMOs) wherein the RBI purchases G-Secs from the Banks.
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    Consider the following statements: Under the Open Market Operations (OMOs), the RBI may either purchase or sell G-Secs depending upon the market conditions but under the G-SAP, the RBI would only be purchasing G-Secs. The RBI uses OMOs either to inject or suck out excess liquidity depending upon the liquidity conditions but, the G-SAP is mainly used for controlling the yield rates on the long term G-Secs. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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    Consider the following statements: Under the Open Market Operations (OMOs), the RBI may either purchase or sell G-Secs depending upon the market conditions but under the G-SAP, the RBI would only be purchasing G-Secs. The RBI uses OMOs either to inject or suck out excess liquidity depending upon the liquidity conditions but, the G-SAP is mainly used for controlling the yield rates on the long term G-Secs. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: Under the Open Market Operations (OMOs), the RBI may either purchase or sell G-Secs depending upon the market conditions but under the G-SAP, the RBI would only be purchasing G-Secs. The RBI uses OMOs either to inject or suck out excess liquidity depending upon the liquidity conditions but, the G-SAP is mainly used for controlling the yield rates on the long term G-Secs. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: Under the Open Market Operations (OMOs), the RBI may either purchase or sell G-Secs depending upon the market conditions but under the G-SAP, the RBI would only be purchasing G-Secs. The RBI uses OMOs either to inject or suck out excess liquidity depending upon the liquidity conditions but, the G-SAP is mainly used for controlling the yield rates on the long term G-Secs. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
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