Open market operation refers to :

(A) borrowing by scheduled banks to industry and trade
(B) purchase and sale of government securities by the RBI
(C) deposit mobilisation
(D) borrowing by scheduled banks from the RBI

Correct Answer : purchase and sale of government securities by the RBI
Explanation : The term ‘Open Market operation’ stands for the purchase or sale of the Government securities by the Central Bank from or to the public and banks on its own account to influence the supply of funds in the capital market and the interest rates and the volume of credit.
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