Open market operations: Open market operations refer to buying and selling of government securities by centralbank to publicand banks. This is done to influence money supply in the country. Sale of government securities to commercial bank means flow of money into central bank which reduces cash reserves. Consequently, credit availability of commercial banks is controlled.
On the other hand, if R.B.I purchases government securities, it will increase the money supply with commercial banks that will increase their lending capacity and flow of money into the economy.