2013 GS Paper I, all questions
UPSC Prelims 2013 · GS Paper I
Question 75: Economy and Social Development
In the context of Indian economy, ‘Open Market Operations’ refers to
aborrowing by scheduled banks from the RBI
blending by commercial banks to industry and trade
cpurchase and sale of government securities by the RBI
dNone of the above
AnswerUPSC’s answer is (c).
Open market operations are the purchase and sale of government securities by the central bank in the open market. When the RBI sells securities it draws money out of the banking system and reduces the money supply; when it buys them it releases money into the system. They are different from banks borrowing from the RBI and from commercial bank lending to trade and industry.
Why each option is right or wrong
- (a) Wrong. Borrowing by banks from the RBI is done through repo or the Bank Rate.
- (b) Wrong. Lending by commercial banks to industry and trade is ordinary credit.
- (c) Correct. OMO means the RBI buying and selling government securities.
- (d) Wrong. Option (c) describes it.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2013, General Studies Paper I, Series A. The paper on upsc.gov.in.