Open market operations (omo)

-as defined by RBI, under OMO, RBI purchase and sells the variety of assets such as foreign exchange, gold, government securities and even company shares. However, in practice OMO are confined to purchase and sale of government securities only.RBI generally conduct these operations through bank and financial institutions.

-government securities may be short term or long term securities. Treasury bills of 91 days and 364 days are the short term securities of 3 years, 5 years or more upto 30 years.

-if RBI purchases the securities interest rate will come down and more mony will come into market. If RBI sells securities, interest rate will go up as mony supply will be reduced.