What is the primary objective of Open Market Operations (OMOs) conducted by the RBI?
- To regulate the stock market
- To manage durable liquidity in the banking system
- To fix the exchange rate of the Rupee
- To distribute government subsidies
Answer: To manage durable liquidity in the banking system
OMOs involve the outright sale or purchase of government securities by the RBI. Selling securities absorbs permanent (durable) liquidity from the market, while buying them injects liquidity. It is a primary tool for signaling the monetary policy stance over the medium term.