Download - Open Market Operation &
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8/7/2019 Open Market Operation &
1/20
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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8/7/2019 Open Market Operation &
2/20
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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8/7/2019 Open Market Operation &
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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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8/7/2019 Open Market Operation &
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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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