(a) Open Market operation (OMO) refers to the sale and purchase of government securities in the open market by the central bank (RBI). By selling such securities, the central bank soaks liquidity from the economy and by purchasing the government securities central bank releases liquidity. This is an important method of regulating the money supply (liquidity) in the market.
(b) Margin requirements of loan refers to the difference between the current value of the security offered and amount of loan guaranteed. When margin requirement is lowered by the central bank,the supply in the economy Conversely, a rise in the margin requirements will contract the supply of credit in the economy
