Purpose Of Open Market Operations

Following are the functions of OMO:

• The purpose of Open Market is to control credit supply and quantity of money in the economy.
• By controlling quantity of money the Central Bank also ensures price stability.

Other Functions are:

• To administer and maintain the prices of government securities.
• To create suitable climate for the flotation of new loans.
• To activate the money market.
• To manage gold inflows and outflows.
• To create climate in which other tools of monetary policy i.e., bank rate could be used effectively.
• To avoid sudden fluctuations in the money market.
• To support Government credit.