What are open market operations? How do these work as a method of credit control?
The sale or purchase of government securities by the Central Bank in open market is termed as open market operations.
To reduce credit, the government securities are sold by the Central Bank. It reduces the supply of money in the hands of commercial banks and common public. On the other hand, to increase the credit, the Central Bank purchases the securities from public which releases money in the market. In this way, the Central Bank uses open market operations as a method of credit control.