Q. Consider the following statements regarding Open Market Operations (OMOs) in India:

1. The market for Government securities is well developed in India.
2. The Reserve Bank of India (RBI) has the capability to buy and sell Government securities.
3. Open Market Operations alone can effectively carry out Monetary Control in India.

Which of the above statements is / are correct?
Answer: Only 2 is correct
Notes: The first statement is incorrect as the market for Government securities in India, though improving, is not yet well developed. The second statement is correct because the RBI possesses full authority and practical capacity to buy and sell such securities. The third statement is incorrect; Open Market Operations alone are not sufficient for effective monetary control—other instruments like the Liquidity Adjustment Facility are also necessary.