RBI to Infuse Rs 15,000 crores into the Financial System

The Reserve Bank of India (RBI) has decided to infuse Rs 15,000 crore into the financial system through purchase of government bonds via the auction route. The purchase of government securities would be through open market operations.

Open Market Operations

  • Open market operations are conducted by the RBI through sale or purchase of government securities to adjust money supply conditions.
  • RBI sells g-secs to suck out liquidity from the system and buys back g-secs to infuse liquidity into the system.
  • OMO is one of the statutory tools of the RBI along with other monetary policy tools such as repo rate, cash reserve ratio and statutory liquidity ratio to adjust the quantum and price of money in the system.
  • RBI undertakes open market operations through commercial banks and does not directly deal with the public.
  • RBI uses open market operations to smoothen the liquidity conditions through the year and minimise its impact on the interest rate and inflation rate levels.

Open Market Operations are one of the most flexible tools with the RBI to implement and control monetary policy.

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