Ans – (c)
Open Market Operations:-
Open market operations (OMO) refer to the buying and selling of government securities by the Central Bank from/to the public and commercial banks.
RBI is authorised to sell or purchase treasury bills and government securities.
It does not matter whether the securities are bought or sold to the public or banks because ultimately the amounts will be deposited in or transferred from some bank.
- The sale of securities by the central bank reduces the reserves of commercial banks. It adversely affects the bank’s ability to create credit and therefore decreases the money supply in the economy.
- The purchase of securities by the central bank increases the reserves and raises the bank’s ability to give credit.