Open Market Operations
A central bank's buying or selling of government securities to add or remove liquidity from the banking system.
Formula
Test: the central bank transacts in government securities with the market, changing system liquidity by the transaction value
Unit
₹ crore
In depth
Open market operations are the routine instrument of liquidity management: buying securities injects rupees into the system, selling them withdraws rupees. They are more precise than changing the cash reserve ratio, since the amount and timing can be tuned, and they simultaneously affect bond yields because they change demand for government paper. India also uses operation twist, buying long-dated and selling short-dated securities together, to change the shape of the yield curve without changing total liquidity. Their effect on yields is why bond markets watch the calendar of these operations closely.
Worked example
The central bank buys ₹25,000 crore of government securities. The system gains ₹25,000 crore of liquidity, and bond prices rise on the additional demand, pushing yields down.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Open Market Operations” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.