UPSC Prelims Practice Questions — RBI buys ₹50,000 cr. G-Secs for liquidity, tranche 2 on Friday

Question 1

Which one of the following is the principal quantitative instrument used by the Reserve Bank of India for managing durable liquidity in the banking system?

Accepted Answer

Outright Open Market Operations (OMO)

Answer

Variable Rate Repo (VRR) Auction

Answer

Marginal Standing Facility (MSF)

Answer

Standing Deposit Facility (SDF)

Question 2

Within the Reserve Bank of India, which department is responsible for operationalising Open Market Operations such as the March 2026 G-Sec purchase auctions?

Accepted Answer

Financial Markets Operations Department

Answer

Department of Currency Management

Answer

Department of Government and Bank Accounts

Answer

Department of Economic and Policy Research

Question 3

Under which one of the following statutory provisions does the Reserve Bank of India derive its power to purchase and sell Government Securities in the open market?

Accepted Answer

Section 17(8) of the Reserve Bank of India Act, 1934

Answer

Section 42(1) of the Reserve Bank of India Act, 1934

Answer

Section 21 of the Banking Regulation Act, 1949

Answer

Section 24 of the Banking Regulation Act, 1949

Question 4

With reference to the Reserve Bank of India's March 2026 OMO purchase as compared with the December 2025–January 2026 OMO round, consider the following statements:
1. The March 2026 round aggregates ₹1,00,000 crore in two tranches, whereas the December 2025–January 2026 round aggregated ₹2,00,000 crore in four tranches.
2. Unlike OMO sales, outright OMO purchases always drain durable liquidity from the banking system.
3. Both rounds were conducted in the secondary market under Section 17(8) of the Reserve Bank of India Act, 1934.
Which of the statements given above is/are correct?

Accepted Answer

1 and 3 only

Answer

1 only

Answer

2 and 3 only

Answer

1, 2 and 3

UPSC Prelims Practice Questions — RBI buys ₹50,000 cr. G-Secs for liquidity, tranche 2 on Friday

Q1. Which one of the following is the principal quantitative instrument used by the Reserve Bank of India for managing durable liquidity in the banking system?

Q2. Within the Reserve Bank of India, which department is responsible for operationalising Open Market Operations such as the March 2026 G-Sec purchase auctions?

Q3. Under which one of the following statutory provisions does the Reserve Bank of India derive its power to purchase and sell Government Securities in the open market?