Open Market Operation &

8/7/2019 Open Market Operation &

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PRESENTED BY:-

Group-6

SMRUTI RANJAN

SHIBA SANKAR

MIHIR RANJAN

PRATUSH KUMAR

PALISHREE SWAI

RABI NARAYAN

SHIBA SANKAR BEHERA

RAVENSHAW MANAGEMENT CENTRE, CUTTACK


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Open market operations:- are the means ofimplementing monetary policy by which a centralbank controlsnational money supply by buyingandsellinggovernment securities, or otherfinancial instruments.


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Cont.


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>Government bonds

>Foreign currency

>Gold

>Money market securities


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FEDERAL RESERVE POLICY TOOLS:


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INTERBANK MARKET

Funds held immediately prior to final settlement toenable banks to meet obligations to each otherandto the central bank. Only institutions with accounts

at the CB & the CB p

articip

ate

.

CALLLOAN orREPO MARKET

Market for funds with overnightmaturity. Transactions take placeduring the day. Banksand largeorganizations participate.

TERM MONEY MARKET

Market for funds with maturities>1day and


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A repurchase agreement (repo) is the sale ofsecurities by a repo dealer( a bank) to acounterparty, combined with asimultaneousagreement to buy back the securitiesat theoriginal sale price plus interest.

The securities used ina repo transactionareusually govt. bills or bonds, or other very highquality issues.


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Most repo tradesare very short term, typically one week or twoweeks from the date of transaction.

RBI is typically a lender to the banks through the repo.

If RBI is one of the parties it is calledanRBI repo

If it is between two FIs it is calledamarket repo.

Repo isa form of money market lending

Settlement of Repo transactions: The transfer ofsecuritiesandfu

nds

norm

ally

do

ne withi

nT+1

.


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Purchase of Securities with

Repurchase Agreement

Sales ofsecurities

Repurch

ase of

securitie

s(Technically seals ofsecuritiesandsubsequent repurchase)

CustomerInitial Transition

(sale)T=0

Repo

Bank(RBI)

CustomerTerminating Transition

(Repurchase)T=T

Repo

Bank(RBI)

Principal (cash)

securities

NIdSecurities


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Basic scheme of Repos:-


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Uses of Repo:-


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Factors influencing Repo rates:-


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Rever

se repo:-


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Role of Repo in open market:


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Reserve requirements for repo:-


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Importance of liquidity forecasts in

open market:-


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LAFCorridora

ndCallRate

0 510

15

20

25

5-Jun-00

11-Jan-01

19-Aug-01

27-Mar-02

2-Nov-02

10-Jun-03

16-Jan-04

23-Aug-04

31-Mar-05

6-Nov-

Per cent

CallRate

ReverseRepoR

ate

RepoR


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Summary;-


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Documents

Open Market Operation &