Recently, The Reserve Bank of India (RBI) has said it would conduct an Open Market Operation (OMO) purchase of State Developments Loans. Open market operations (OMO) Open market operations are the sale and purchase of government securities and treasury bills by RBI or the central bank of the country. These include both, outright purchase and sale of government securities , for injection and absorption of durable liquidity, respectively. It is one of the quantitative monetary policy tools. RBI carries out the OMO through commercial banks and does not directly deal with the public. Outright Purchase - When the central bank wants to infuse liquidity into the monetary system, it will buy government securities in the open market. This way it provides commercial banks with liquidity. Sale of government securities - In contrast, when it sells securities, it curbs liquidity. Thus, the central bank indirectly controls the money supply and influences short-term interest rates.